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Marketing Budgets
Firms need to calculate and set budgets for their marketing programme. There are a number of ways in which firms can calculate how much to allocate to their marketing and advertising spend. These methods will be discussed briefly below.
The objective and task method
The company calculates how much they would need to reach their objectives for a particular campaign. For example if we were to launch a new games console how much money would be needed to raise sufficient awareness of this new brand and features to the target audience. A budget is then set with this objective in mind.
Competitive parity method
The firms looks at how much competitors are spending on marketing and advertising and decide to match that spend or spend more.
Percentage of sales approach
The firm decides to spend a percentage of total sales on their marketing campaign. For example the company will decide to put aside 15% of total sales to their marketing and promotional campaign.
Affordable approach
The marketing budget is based on how much money the firm has left over after it deducts all its costs. I.e. what it can afford.
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